Nobody in GoM objected to the mining Bill’s profit-share clause

Nobody in GoM objected to the mining Bill’s profit-share clause

New Delhi: A group of ministers (GoM) headed by finance minister Pranab Mukherjee is likely to take up the draft mines and minerals development and regulation Act before the winter session of Parliament begins. In an interview, Union minister for mines B.K. Handique discusses various aspects of the proposed law, including a clause obliging miners to share 26% of their profits with local people.

The draft mining Bill proposes a 26% profit sharing clause, which has raised a debate. What was your ministry’s prime objective behind instituting this clause in the draft Bill?

People tell me, this is not “good economics." I ask-what then, is good economics? I don’t think just managing the economy well is "good economics." Lots of people suffer pain in the process of economic growth. It should bring them relief. My government is committed to inclusive growth. If we don’t give the affected people their due, it would mean denial of justice.

The mining industry has several reservations on the clause. They claim that sharing a fourth of the profits would be economically unviable for them, as it is a capital incentive business with a long gestation period. How do you respond to that?

Iron ore certainly does not have long gestation periods, its a quick business. The question again pertains to providing justice to those who are deprived of their lands. We want these people to have a regular stream of income-so that they can get two square meals and provide for health and education.

Industrialists say that they will build infrastructure for these people. But if these people do not have the purchasing power, what will they do with such infrastructure? So, a regular, annual income for them is important. And this compensation will not be for good, but only throughout the life-cycle of the mine. I agree that there is a cost on the mining activities, but keeping in view the increasing global demand for minerals and metals, I would not agree that the returns from mining would be seriously impacted.

The steel minister has gone on record, expressing his ministry’s reservations on the profit sharing clause. The steel industry has also expressed shock over the clause. What do you have to say about their contention that it will be detrimental to the industry?

Such questions were not raised earlier. If they had such an opinion, they might have corrected it, by now. They have their own thinking, and I am no one to say that their opinion is incorrect. But they never expressed their opposition in the meetings of the GoM. No one opposed the 26% clause in the GoM, not even the steel minister.

The steel minister has also sought a “special consideration" in the profit sharing clause for PSUs. Are you considering the same, or would you think such a consideration would be “discriminatory" as some private players have suggested?

As regards the PSUs, while we have already addressed some of the concerns, the rest will also be addressed. I cannot however discuss that at the moment.

What is the rationale behind introducing “go and no go" areas? Will it not hurt the long term mining prospects in the country?

This is a proposal that came from the environment ministry. We are however looking to modify the same. You cannot strictly demarcate “go" and “no go" areas. Minerals are place specific, unlike forests, and any other land use of areas bearing minerals would necessarily have to consider the fact that minerals as a national resource are equally important.

Why has the mining sector failed to attract big investment thus far?

There is little transparency now. Prospecting itself is a costly operation, so unless someone knows that he has a fair chance of getting a license, why should he spend money prospecting. This is why we have failed to attract high technology and investment. The bill would seek to do away with this.

Could you please explain in detail on how the proposed mining bill would bring about transparency and expediency to the process of awarding mining blocks to perspective bidders?

The existing act has a highly discretionary concession system. A state government can give anyone a mining lease, even if he applies late. Applicants can be selected without stating any clear reasons. The central government cannot intervene in case of delays and renewal of concessions. As per the new draft, state governments shall be required to notify areas where mineralization is known, for prospecting, exploring and mining. The draft bill allows seamless transition from exploration to mining lease.

Two members of the Meena Gupta Committee, which went into the question of environmental clearances for Posco’s proposed project had raised reservations on the way compensation was offered to displaced people and had said that the best way to compensate the displaced would be to “genuinely give equivalent land for land compensation so that they eking a sustainable livelihood" instead of just giving them cash compensation.

Wouldn’t this be a better mechanism, and does the proposed bill have any clauses on these lines?

Where do we have so much land? You cannot give them land 50-100 kilometers away from where the industries are. How will they live there? How many people have actually been settled by the ’Narmada Bachaao Andolan’? So, a one time price compensation is the best method. In rural India, people get a pittance for their land. I would therefore again ask, does "good economics" have an answer to such a situation?

Could you please elaborate on the mechanism that would be employed to share profits with the locals? That is, how would the profits actually be passed on to them?

The mechanisms to share the benefits of mining operations have been worked out in terms of the National Mineral Policy, 2008 and the recommendations of the Hoda Committee. Speaking broadly, the money will be channelled directly via a ’District Mineral Foundation’ since we do not want the money to go via the state government. This will be on the lines of the MPLADS fund. The District Magistrate will be the chairman of the foundation and will deal directly with the affected people.

When is the Group of Ministers (GoM), headed by Finance Minister Pranab Mukherjee likely to give its final assent to the new draft mining Bill? When is the bill likely to be tabled in Parliament?

The GoM will meet before the coming session of Parliament. We need just one more sitting and are hopeful that the GoM will clear the bill. Once that happens, it will be sent to the Cabinet, after whose approval, it will be tabled in the Parliament.